First, consider rules like fuel efficiency standards, or "net metering" mandates requiring that utilities buy back the electricity generated by homeowners' solar panels. Any economics student can tell you that such rules are inefficient compared with the clean incentives provided by an emissions tax. But we don't have an emissions tax, and fuel efficiency rules and net metering reduce greenhouse gas emissions. So a question for conservative environmentalists: Do you support the continuation of such mandates, or are you with the business groups (spearheaded by the Koch brothers) campaigning to eliminate them and impose fees on home solar installations? Second, consider government support for clean energy via subsidies and loan guarantees. Again, if we had an appropriately high emissions tax such support might not be necessary (there would be a case for investment promotion even then, but never mind). But we don't have such a tax. So the question is, Are you O.K. with things like loan guarantees for solar plants, even though we know that some loans will go bad, Solyndra-style? Finally, what about the Environmental Protection Agency's proposal that it use its regulatory authority to impose large reductions in emissions from power plants? The agency is eager to pursue market-friendly solutions to the extent it can — basically by imposing emissions limits on states, while encouraging states or groups of states to create cap-and-trade systems that effectively put a price on carbon. But this will nonetheless be a partial approach that addresses only one source of greenhouse gas emissions. Are you willing to support this partial approach? By the way: Readers well versed in economics will recognize that I'm talking about what is technically known as the "theory of the second best." According to this theory, distortions in one market — in this case, the fact that there are large social costs to carbon emissions, but individuals and firms don't pay a price for emitting carbon — can justify government intervention in other, related markets. Second-best arguments have a dubious reputation in economics, because the right policy is always to eliminate the primary distortion, if you can. But sometimes you can't, and this is one of those times. Paul Krugman responds to Hank Paulson's call for a Carbon Tax this morning. Krugman points out the unlikely passage of such a tax in the current environment and proposes some "second best" alternatives to deal with the urgent problem in the interim.
But note what's not on his list: the odious cap and trade flim-flam. Cap and trade is a grift, a rip-off, snake oil. That's why the Third Way types love it.
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First, consider rules like fuel efficiency standards, or "net metering" mandates requiring that utilities buy back the electricity generated by homeowners' solar panels. Any economics student can tell you that such rules are inefficient compared with the clean incentives provided by an emissions tax. But we don't have an emissions tax, and fuel efficiency rules and net metering reduce greenhouse gas emissions. So a question for conservative environmentalists: Do you support the continuation of such mandates, or are you with the business groups (spearheaded by the Koch brothers) campaigning to eliminate them and impose fees on home solar installations? Second, consider government support for clean energy via subsidies and loan guarantees. Again, if we had an appropriately high emissions tax such support might not be necessary (there would be a case for investment promotion even then, but never mind). But we don't have such a tax. So the question is, Are you O.K. with things like loan guarantees for solar plants, even though we know that some loans will go bad, Solyndra-style? Finally, what about the Environmental Protection Agency's proposal that it use its regulatory authority to impose large reductions in emissions from power plants? The agency is eager to pursue market-friendly solutions to the extent it can — basically by imposing emissions limits on states, while encouraging states or groups of states to create cap-and-trade systems that effectively put a price on carbon. But this will nonetheless be a partial approach that addresses only one source of greenhouse gas emissions. Are you willing to support this partial approach? By the way: Readers well versed in economics will recognize that I'm talking about what is technically known as the "theory of the second best." According to this theory, distortions in one market — in this case, the fact that there are large social costs to carbon emissions, but individuals and firms don't pay a price for emitting carbon — can justify government intervention in other, related markets. Second-best arguments have a dubious reputation in economics, because the right policy is always to eliminate the primary distortion, if you can. But sometimes you can't, and this is one of those times.
http://www.nytimes.com/2014/06/23/opinion/paul-krugman-conservatives-and-climate-change.html?hp&rref=opinion&_r=0
Typos courtesy of my iPhone
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